The federal government has sent incorrect tax information to about 800,000 people who purchased health insurance last year through HealthCare.gov and asked them to delay filing their returns, Obama administration officials said Friday.
The mistake, which affects a critical part of the president's signature health-care law, could slow tax refunds for many Americans who depend on the money for their family's finances. The people who received the wrong information rely on subsidies to help purchase medical coverage through HealthCare.gov that otherwise might be unaffordable.
The administration's misstep quickly drew criticism from the Affordable Care Act's Republican opponents, who say the error is just the latest evidence that the health-care law is frustrating Americans and doesn't work.
After a bumpy debut more than a year ago, HealthCare.gov appeared in recent months to be running smoothly. There had been no major tech glitches, and just days ago, the administration was trumpeting the wrap-up of an enrollment period that surpassed the president's goals.
But on Friday, administration officials said 800,000 people - about 15 percent of those who enrolled through HealthCare.gov last year - had been notified of the error and were asked to delay filing their returns for two or three weeks. About 50,000 people who already filed their 2014 tax returns will probably have to resubmit information to the federal government. The error boiled down to mixing up the figures being used to calculate subsidies, the government said Friday.
The subsidies are a significant part of the Affordable Care Act's design. Available to those who earn too much to qualify for Medicaid in their states, the financial assistance allows many more people to buy coverage and be part of the insurance pools. That is critical to the exchanges because there needs to be enough healthy patients balanced with those who are sick.
The administration's mistake comes as the health-care law remains under significant political pressure. The Supreme Court will soon hear a case that could eliminate subsidies in states that declined to run their own health exchanges. If the justices rule against the subsidies, about 8.2 million people could lose their health insurance.
In a separate announcement Friday, the administration said it was extending enrollment for taxpayers who could be hit with a penalty for not being insured.
Republicans seized on the administration's error and its addition of a separate enrollment period.
"Whether it's providing taxpayers with incorrect subsidy information or having to create special enrollment periods so that taxpayers can avoid costly penalties, Obamacare continues to frustrate and confuse Americans," the chairman of the Senate Finance Committee, Orrin G. Hatch (R-Utah), said in a statement. "The Administration's latest attempt to unilaterally tweak their own law to avoid political fallout once again underscores the failed policies rooted in Obamacare's DNA."
The error is tied to the local "benchmark" premiums that the government uses to calculate subsidy payments. The cost of the 2015 benchmark plan was listed on some forms, instead of the 2014 figure, the Department of Health and Human Services explained in a blog post. The administration isn't sure how this error occurred, said Andy Slavitt, a top administration official who oversees the federal health insurance exchanges.
"We're still investigating the cause," Slavitt said Friday in a call with reporters.
In 2014, the first year of exchange operations, enrollees have two options for receiving financial assistance: receive it in advance or at tax season via a refund.
For people who elected to receive subsidies in advance, the federal government sent money to insurers, which then applied the monthly discount on premiums. But during tax season, those consumers are on the hook for repaying part of the subsidy if they earned more than they projected, or they get a refund if they underestimated their financial need.
Apart from the government's error, the tax preparation firm H&R Block estimated that federal support was too generous for about half of subsidy recipients last year.
Lynn Quincy, Consumers Union's health policy director, said waiting two or three more weeks to file their returns may be a challenge for some low-income families.
"There are a lot of families who count on the refund to make large purchases," she said. "To the extent that they're still getting a refund - which we hope they are - it will be hard to wait these extra couple of weeks."
Quincy's group had been advising health-care shoppers to take as little as possible of the premium subsidy in advance to avoid a potentially painful process during tax season if they end up owing the government money. But she acknowledged that doing so would make it difficult for many to afford monthly premiums.
People who obtained subsidies under the health-care law receive a 1095-A tax form, which indicates each household member who got coverage and how much in subsidies the government provided each month. If someone received too much in subsidies, he or she will have to pay it back.
"It's not easy to figure this thing out, even for someone who knows what this is all about," said Bob Williams of the nonpartisan Tax Policy Center.
The administration is urging people it notifies to delay filing their returns until they receive the corrected 1095-A form, probably early next month.
Williams said it's unclear whether this latest snag is going to affect consumer behavior because some people have already been struggling with the complex subsidy system.
This latest wrinkle shows that the law, soon approaching its five-year anniversary, is still a work-in-progress. This marks the first tax season that filers are interacting with the new subsidy scheme.
Friday's announcement came just days after a smoother 2015 enrollment period came to a close. At least 11.4 million Americans signed up for 2015 exchange health plans, putting the administration on target to beat its enrollment goal for the year.
Uninsured Americans facing the tax penalty for not having health insurance in 2014 will have a new opportunity to sign up for 2015 health plans. People who learn they're facing a penalty will have between March 15 and April 30 to sign up for coverage, the administration said Friday.
The controversial mandate, which survived a Supreme Court challenge in 2012, was built into the law to discourage people from waiting until they were sick to sign up for coverage since they can no longer be rejected by insurance companies because of a pre-existing medical condition. But Democratic lawmakers and supporters of the law said it was unfair to punish people who weren't aware of the penalty, which in 2014 was $95 or 1 percent of household income, whichever is greater. The penalty in 2015 jumps to $325 or 2 percent of household income.
"It just makes sense to give these uninsured consumers a chance to purchase insurance right away, rather than making them wait another year to get covered," said Enroll America's president, Anne Filipic, whose industry-backed group coordinates enrollment efforts in key states. Administration officials suggested that the special enrollment period would be unique this year, as consumers come to learn about the law's new coverage system.